With shares of Chevron (NYSE:CVX) trading around $120, is CVX an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Chevron engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. The company operates in two segments, Upstream and Downstream. The Upstream segment is involved in the exploration, development, and production of crude oil and natural gas while the Downstream segment engages in refining crude oil into petroleum products. Through its segments, Chevron is able to provide a range of energy products and services to a multitude of companies around the world. As economies and businesses expand, Chevron provides the energy needed to fuel production around the world.
T = Technicals on the Stock Chart are Strong
Chevron stock has doubled since hitting lows during the 2008 Financial Crisis. The stock has gone on to trade much higher and is now trading at all-time high prices. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Chevron is trading above its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Chevron options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Chevron Options | 18.76% | 36% | 33% |
What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| May Options | Flat | Average |
| June Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Mixed Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Chevron’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Chevron look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | -2.57% | 43.94% | -31.38% | -4.94% |
| Revenue Growth (Y-O-Y) | 1.03% | 0.95% | -9.91% | -9.2% |
| Earnings Reaction | 1.29% | 1.17% | -2.77% | 0.91% |
Chevron has seen mixed earnings and revenue figures over the last four quarters. From these figures, the markets have generally been pleased with Chevron’s recent earnings announcements.
P = Excellent Relative Performance Versus Peers and Sector
How has Chevron stock done relative to its peers, BP (NYSE:BP), Exxon Mobil (NYSE:XOM), Royal Dutch Shell (NYSE:RDS), and sector?
| Chevron | BP | Exxon Mobil | Royal Dutch Shell | Sector | |
| Year-to-Date Return | 12.61% | 4.49% | 2.56% | -1.41% | 9.61% |
Chevron has been a relative performance leader, year-to-date.
Conclusion
Chevron provides essential energy products and services to a wide range of companies operating in different industries around the world. The stock has been on a bullish run for the last several years and is now trading near all-time high prices. Earnings and revenue figures have been mixed but investors have been pleased during most of the last four quarters. Relative to its peers and sector, Chevron has led in year-to-date performance by a wide margin. Look for Chevron to continue to OUTPERFORM.
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